Skip to Content

UNU-WIDER Logo

30 Years of economics for development

Indian Economic Growth: Lessons for the Emerging Economies

Can we use neoclassical growth model to single out the important transmission channels through which external factors or ‘primitives’ affected the Indian economy and caused the remarkable growth of the period 1982–2002? In this paper, we answer the question by applying the new technique of business cycle accounting to the Indian economy. Our results show us that the primary conduit of policies that brought about significant growth in India was productivity that registered an unprecedented increase particularly in the 1990s. Our results further indicate that changes in labour market frictions and investment market frictions did not play a significant role, though increased government consumption aided growth by propping up demand. In addition, we examine the effective tax rates in India and find that while investment taxes barely fluctuated, income tax rates were increasing throughout. We suspect other positive developments in the Indian economy overwhelmed the negative effect of increasing labour income taxes on growth. Our result suggests that any emerging country that aims to replicate the Indian experience would do well to formulate policies that target productivity, a lesson that seems consistent with the Japanese experience since the Second World War.
Publisher:
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2008/67
Title:
Indian Economic Growth: Lessons for the Emerging Economies
Authors:
Suparna Chakraborty
Publication date:
July 2008
ISSN Web:
1810-2611
ISBN 13 Web:
9789292301217
Copyright holder:
© UNU-WIDER
Copyright year:
2008
Keywords:
business cycle accounting, India, growth, wedges, neoclassical growth, taxes
JEL:
E13, E32
Project:
Southern Engines of Global Growth
Sponsor:
The governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Norway (Royal Ministry of Foreign Affairs), Sweden (Swedish International Development Cooperation Agency — Sida) and the United Kingdom (Department for International Development).
Format:
online
Back to Top

^ Back to top

1995-2014 United Nations University World Institute for Development Economics Research

© CC BY-NC-SA 3.0 IGODisclaimer | Terms of Use
UNU-WIDER, Katajanokanlaituri 6 B, FI-00160 Helsinki, Finland
Tel: +358(0)9 6159911 | Fax: +358(0)9 61599333
mail: wider@wider.unu.edu/firstname.lastname@wider.unu.edu